15
profit, Ponan’s business is now able to invest more on marketing.
“In new business terms, employing outside consultants has proved costly and not really paid off. In fact, we have gained more business ourselves through apprentices that I trained myself.”
appointment where boardroom family relationships may be involved, she added.
NEDs at BEcause Brand Experience are retained on a fixed contract per annum, with bonus potential, are given a job description, objectives with KPIs, and tasked with providing monthly activity reports to the board. “It’s all based on performance not work- hours.”
In 2014 Richey successfully brought in handpicked NEDs to her management board to generate new business. “Business development in our marketplace is like big game hunting where everyone is after the same prize, and the associated costs to win a new client are high. We only work with the top global brands, and one new route to market has been through the non-execs’ networking and relationships.”
Gareth Anderson
Rich Marsh: “My business is very new and we are on the cusp of looking for external help and talking to investors.” Successful friends had helped informally in “... providing me with the business balance to prevent me doing some of the crazy things I might have done.
“I have probably been carrying on for too long without professional assistance, but now seems the right time to do so. We have got many possible footholds and fingernail clinging opportunities within some international markets but that next step is outside my comfort zone, so expert advice or non-executive director (NED) influence would be good.”
What type of NED do you need?
EY’s Gareth Anderson asked to what extent NEDs looking to work with fast-growing entrepreneurial businesses were also looking for an equity stake (perhaps under the Enterprise Investment Scheme (EIS)) in the business?
“They often are, but I don’t think you have to agree to that,” said Edmunds, who has appointed NEDs in the past with varying success. Her advice was to involve NEDs only for specific short-term purposes, such as market or cultural shift.
“When you are growing very quickly, you need to take what help you want and then move on to the next set of expertise.”
Richey agreed. “We bring in NEDs on a fixed term, as after a period of time people have probably given us as much as they can. It is very important to keep focused on why you are bringing in a NED and agree just one or two very specific objectives.”
However, her company chairman, a NED, has a continuing role to provide governance and impartiality to board debate, a useful
THE BUSINESS MAGAZINE – THAMES VALLEY – MARCH 2016
Rees said the Redwood Technologies Group does not have NEDs due to its flat management structure, which is geared towards expansion through internal promotion and the integration of experienced third-party resources and consultants, building on its senior executives’ extensive network of contacts. “Our senior management team is highly-experienced in our wider industry, and we look towards experienced consultants or even FTEs to fill any gaps. Also, when you are growing a business, it is important to have very clear areas of operation for which individual managers are responsible on a daily basis.”
Proven serial entrepreneur David Sanger is a NED with three companies. A NED can be “yesterday’s man and today’s consultant” helping young businesses avoid the errors of growth, he explained, or tasked with specific project work. “Would my early businesses have been better if I had brought in someone who had been through the hoops before? The answer has got to be ‘Yes’. I think NEDs can be very useful appointments.”
Sanger the entrepreneur actually gained much help through the Academy for Chief Executives, the UK’s leading executive coaching and mentoring organization. “Monthly meetings were a bit like having 12 NEDs around the table.”
Lawyer Sara Valentine said the value of NEDs depended upon the management board’s attitude to control and the company’s growth stage. “Their introduction can produce interesting dynamics. Where I have seen it work very well is with fast-growing businesses where NEDs bring in new ideas and expertise to help the business reach new markets or clients. It’s not right for every business, but it can work well for some.”
Sanger said NEDs could often ask the questions that mattered; see the problems more clearly than an incumbent but blinkered management.
“It would be wrong to bring in a NED just to have someone older and possibly wiser on the board. I love Sharon’s idea of NEDs being charged with bringing in sales via their contact
SOUTHERN entrepreneurs
black-books for a set two-year period. Whatever the size of the company, every business rests or falls on its sales.”
£15,000-£25,000 per annum was about right for a NED, and adopting a commission rate for sales generated would not be out of order. “The NED role is not just a few days per week, you are generally always on tap to advise or assist,” he added.
Does external investment have to mean giving up control?
Putting a NED on the board can be an external investment pre-requisite, Valentine pointed out. “Some companies struggle with this. They want the investment, but don’t want to relinquish control. Actually, the right NED appointment can positively challenge a business and help it grow.”
Enabling NEDs to gain equity through investment helps align their thinking and ensures commitment to the company, and EIS/SEIS investments can also provide attractive tax reliefs for NEDs on exit, Sanger noted.
Edmunds revealed that Clarify allows its executive board to gain Class B shares and EMI scheme involvements, but the company had not required any outside investment. “I have always questioned where I would get most business gain from equity investment, potentially from the investor’s skills and experience, I suppose. But, it’s also quite healthy to maintain a balance by growing within your own financial means.”
Julianne Ponan
However, with the US market being a likely Clarify growth area, Edmunds suggested the company would consider external investment supported by expertise, to help underpin that step-change.
Continued overleaf ...
www.businessmag.co.uk
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